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The Most Dangerous Legislation I've Seen...

"This is the most dangerous piece of legislation I've seen in more than 30 years working in this industry." These were the words of Darrell Minniear, President of Martinsville DuPont Credit Union, as he spoke with the delegation from the Piedmont Chapter which made the trip to Richmond on January 28th. House Bill 482 and Senate Bill 440 would essentially make it possible for a bank to acquire a state chartered credit union while simultaneously decimating the equity that members have built up over the years. The Piedmont Chapter of Credit Unions is asking you, the members and employees of all credit unions in Southside Virginia, to stand with us in opposition to this bill.

Please visit this link for more details on how you can contact your elected representatives to voice your opinion and opposition to HB 482/SB 440.

So what's the big deal about this bill anyway?

Problem 1: Credit unions and banks are two different species.
Credit unions are a non-stock entity, meaning that there are no 'shares' of a credit union that may be bought and sold. Banks are divided into shares which are owned, not necessarily by bank customers, but by anyone who wants to purchase them. The profits earned by banks pay dividends to its shareholders. Credit unions are literally owned by their members. All members have an equal 'share' in the credit union and thus all members carry an equal vote. The 'profits' earned by the credit union are given back to the members in various ways such as lower loan rates and higher deposit rates.

As the law stands now a credit union can merge with another credit union or convert itself into a mutual savings bank. Banks can merge with other banks. In the few real life examples of a credit union conversion to a mutual savings bank, the upper management of the credit union was well compensated and studies by NCUA show that it was detrimental to the members of the credit union.

Problem 2: Members' equity in their credit union.
Credit unions put most of their 'profits' back into the pockets of their members with low loan rates and high deposit rates. Part of credit union 'profits' go to a category called undivided earnings. This money serves to keep overhead low and also as a sort of rainy day fund for the credit union. This is, in a sense, the legacy left by the decades of hard work and commitment by credit union members, volunteers, and employees.

If HB 482/SB440 passes, credit unions which are well capitalized, meaning they are doing well and have a significant amount in undivided earnings, would become acquisition targets for larger banks. Such acquisitions would mean the end of credit union services for current members, the loss of jobs for credit union employees, as well as the loss of affordable financial services in the community. The bank would have taken the assets of the credit union and eliminated the competition at the same time.

At the very least, language must be inserted into this bill to address what happens to the members' equity of their credit union. The money in undivided earnings should be divided among credit union members according to their individual share deposits, before they are absorbed and distributed to the shareholders of the acquiring bank.

Members Don't Win
In a time when there is a nationwide resurgence of thrift, credit unions are leading the charge to help rebuild our economy and help Americans succeed. HB 482/SB 440 would paint a giant target on the backs of successful credit unions that big banks will find impossible to ignore. If this bill passes, credit union members and our communities will lose! We need your help. Please contact your delegate and senator and ask them to vote NO against these bills

Please visit this link for more details on how you can contact your elected representatives to voice your opinion and opposition to HB 482/SB 440.

UPDATE 02-03-2010

Our voice has been heard by legislators... See here...

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